M/S Snofield Foods (P) Ltd v. State of Kerala and Others

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MRS. JUSTICE SHOBA ANNAMMA EAPEN TUESDAY, THE 19[TH] DAY OF JULY, 2022 / 28TH ASHADHA, 1944** ## **WP(C) NO. 31204 OF 2018** ## **PETITIONER:** M/S SNOFIELD FOODS (P) LTD KUPPAYODE, MARUTHA ROAD PO, PALAKKAD REP BY ITS CHIEF FINANCE OFFICER, MR, RAMESH BABU C.R BY ADVS. A.KUMAR P.J.ANILKUMAR G.MINI(1748) P.S.SREE PRASAD ## **RESPONDENTS:** - 1 STATE OF KERALA, REPRESENTED BY THE CHIEF SECRETARY, GOVERNMENT OF KERALA, GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM - 695001 - 2 THE COMMISSIONER, STATE GOODS AND SERVICES TAX DEPARTMENT, THIRUVANANTHAPURAM-695001. - 3 STATE TAX OFFICER(INVESTIGATION BRANCH), STATE GOODS AND SERVICES TAX DEPARTMENT, PALAKKAD679502. - 4 ASSISTANT COMMISSIONER, SPECIAL CIRCLE, COMMERCIAL TAX OFFICE, PALAKKAD679502. ## **OTHER PRESENT:** SMT. RESMITHA R. CHANDRAN - GP THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 19.07.2022, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: W.P.(C)No.31204 OF 2018 **==> picture [17 x 6] intentionally omitted <==** ## **JUDGMENT 'C.R'** This writ petition is filed by the petitioner challenging 101[st] Constitutional Amendment of the Kerala State Goods and Services Tax Act, 2017 and a further challenge of Ext.P2 order passed by the third respondent under Section 67(1) of the Kerala Value Added Tax Act,2003 (for short 'the KVAT Act,2003') for the assessment year 2013-14. The prayers in this writ petition are as follows:- - _“A) Declare that clauses(a),(b),(c),(d) and (e) of subsection 2 of Section 174 of the Kerala State Goods and Services Act 2017 [Act 20 of 2017) is illegal and ultra vires Art 246A of the Constitution of India. Section 19 of the Constitution [One Hundred and First Amendment) Act, 2016 and the Kerala State Goods and Services Act 2017 (Act 20 of 2017) and is accordingly to be rendered void and unenforceable;_ - _B) Declare that sub-section 3 of section 174 of the Kerala State Goods and Services Act 2017 (Act 20 of 2017) in so far as it provides for application of Section 4 of the Interpretation and General Clauses Act 1125 (Act VII of 1125) providing for saving of the Kerala Value Added Tax Act 2003 and with regard to the effect of the repeal of the statutes specified in Section 174 (1) (i) is illegal, ultra vires Article 246A of the Constitution of India and Section 19 of the Constitution (One Hundred and First Amendment) Act, 2016 and also beyond the scope and scheme of the Kerala State Goods and Services Act 2017 (Act 20 of 2017) and is therefore to be rendered void and unenforceable;_ _C) Declare that the authorities under the Taxes Department of the State of Kerala have no jurisdiction or powers to levy, assess and collect tax under the Kerala Value Added Tax_ W.P.(C)No.31204 OF 2018 ..3.. _Act, 2003 (Act 30 of 2004) enacted under Entry 54 of the State list of the 7th Schedule to the Constitution as it stood prior to substitution on 16.09.16 by the Constitution (One Hundred and First Amendment) Act, 2016 and/ or also consequent to the introduction of the Kerala State Goods and Services Act 2017 (Act 20 of 2017)._ - _D) Issue a Writ of Certiorari, or such other appropriate Writ, Order or direction, quashing P2 penalty order passed by the 3rd respondent._ - _E) Issue a Writ of Prohibition, or such other appropriate Writ, Order or direction, restraining the Respondents from initiating any proceedings for recovery of the amounts as per P2 penalty order through revenue recovery proceedings or in any other manner know to law pending disposal of the Writ Petition.”_ 2. The main challenge in the writ petition is regarding 101[st] Constitutional Amendment of the Kerala State Goods and Services Tax Act, 2017 stating that the provisions of the Kerala Value Added Tax Act,2003 (for short 'the KVAT Act,2003') can be enforced only until the expiry of one year from the date on which the nationwide goods and service tax was implemented or until the amendment was repealed by a competent Legislature. The aforesaid challenge of 101[st] Constitutional Amendment of the Kerala State Goods and Services Tax Act, 2017 has been considered by this Court in **Sheen Golden Jewels (India) Pvt.Ltd.** v. **- State Tax Officer (IB) 1, Investigation Branch, Thiruvananthapuram and others** [2019 KHC 205] and decided against the petitioner. Hence, in view of the judgment in **Sheen Golden Jewels (Supra)** the petitioner is W.P.(C)No.31204 OF 2018 ..4.. not entitled to get any relief against the said challenge. 3. The next challenge in the writ petition is against Ext.P2 order passed by the third Respondent under Section 67(1) of the KVAT Act,2003 for the assessment year 2013-14 alleging violation of principles of natural justice. The petitioner submits that at the time of filing of objection to Ext.P1 notice, they had specifically asked for an opportunity of personal hearing and in spite of the request, the third respondent has passed Ext.P2 order without granting an opportunity of hearing to the petitioner to explain the clerical errors and mistakes in the notice issued. 4. I have heard the learned counsel for the petitioner and the learned Government Pleader for the respondents. 5. The learned counsel for the petitioner submitted that an opportunity for personal hearing was specifically asked for, while the written reply to Ext.P1 notice was filed before the third respondent and no opportunity was granted to the petitioner. The learned Government Pleader, on the other hand, submitted that sufficient opportunity for personal hearing was granted to the petitioner which they did not avail of. 6. In deciding the issue, it is relevant to note the provision in Section 67(3) of the KVAT Act,2003, which reads as follows:- _“_ _**67. Imposition of penalty by authorities.** -(1) xxxxxxx (2)xxxxxxx_ _(3) No order under sub-sections(1) or (2) shall be passed unless the person on whom the penalty is proposed to be imposed is given an opportunity of being heard in the matter.”_ W.P.(C)No.31204 OF 2018 ..5.. Sub-section (3) of Sec.67of the KVAT Act, 2003 makes it mandatory that before imposition of penalty under Section 67(1) of the said Act, the dealer shall be given an opportunity of being heard. There is a requirement in the Act to give the dealer a reasonable opportunity of being heard before finalisation of the proceedings. 7. Ext.P1 is the notice issued by the third respondent under Sec.67(1) of the KVAT Act, 2003. The concluding paragraph of Ext.P1 notice reads as follows: _“Your objections if any to the above proposal shall be filed within 16 days from the receipt of this notice with documentary proof in support of the contentions failing which the proposal will be confirmed without further notice.”_ As per the said notice, the dealer was asked to file objections, if any, within 16 days from the date of receipt of the notice with supporting documents. No opportunity for personal hearing was granted to the dealer in Ext.P1 notice or thereafter. 8. While issuing Ext.P1 notice or before concluding Ext.P2 Order, it was mandatory for the third respondent to grant an opportunity for personal hearing to the petitioner. Section 67(3) of the KVAT Act mandates an opportunity of being heard in the matter. On going through Ext.P2 Order passed by the third respondent, it is seen that the third respondent has not given any opportunity for personal hearing to the petitioner after filing of the objection and that the petitioner, while filing W.P.(C)No.31204 OF 2018 ..6.. objection, had specifically requested for an opportunity for personal hearing to explain the clerical errors and mistakes in the entries uploaded by the other dealers. While passing Ext.P2 order, the third respondent did not consider the request of the petitioner for personal hearing and finalised the proceedings. Since there is a factual contention by the petitioner that clerical errors and mistakes have been crept in while uploading the bills by the dealer, the respondents ought to have granted the petitioner an opportunity for hearing. Though the main challenge in the writ petition is decided against the petitioner, the factual aspects raised by the petitioner regarding Ext.P2 order that clerical errors and mistakes have been crept in while uploading the bills by the dealer and the contention that a hearing opportunity was not granted, deserve a reconsideration of Ext.P2 order passed by the third respondent. Thus, there is a clear violation of principles of natural justice in finalising Ext.P2 Order. On consideration of the facts and circumstances in the case and on the basis of the arguments made across the Bar, I am of the view that justice will be served if the third respondent is directed to reconsider Ext.P2 order after affording an opportunity of hearing to the petitioner. 9. Hence, the writ petition is disposed of as follows: Ext.P2 Order dated 24.05.2018 passed by the third respondent is hereby set aside. The petitioner is directed to appear before the third respondent on 10.08.2022 at 11 a.m. as last chance. The third W.P.(C)No.31204 OF 2018 **==> picture [16 x 8] intentionally omitted <==** respondent shall afford an opportunity for personal hearing to the petitioner on the objections raised by the petitioner and pass orders in accordance with law, at any rate within a period of three months from the date of receipt of a copy of this judgment. Sd/- **SHOBA ANNAMMA EAPEN, JUDGE** MBS/ W.P.(C)No.31204 OF 2018 ..8.. ## **APPENDIX OF WP(C) 31204/2018** PETITIONER'S EXHIBITS:EXHIBIT P1 TRUE COPY OF THE NOTICE DATED 27.12.2017. EXHIBIT P2 TRUE COPY OF THE PENALTY ORDER DATED 24.5.2018. EXHIBIT P3 TRUE COPY OF THE ORDER REJECTING RECTIFICATION APPLICATION DATED 07.9.2018.